The Importance of Being Solvent


Wealth Isn’t About Money;
It’s About Freedom to Do What You Want

True wealth is the freedom to spend your days doing what you’re passionate about and what you think is important. If you are not living within your means and your cost of living is high, you may have no choice but to keep slogging away at the job you don’t like. But if your costs are low, you’ll find it easier to save money and you’ll be in better shape if you get laid off.  You’ll need a smaller nest egg to retire in comfort, and you may have the financial freedom to take a lower-paying job that you like.

But store up for yourselves riches in heaven, where moth and rust do not destroy, and where thieves do not break in and steal. Matthew 6:20

Want to get your living expenses under control? Try these three steps:

— Take your monthly spending and categorize all expenses as either fixed or discretionary. Fixed expenses include regular bills for mortgage or rent, property taxes, car costs, student-loan payments, utilities, cable TV, insurance policies and groceries. Discretionary costs encompass vacations, eating out, entertainment and all “luxury” spending, like the new electronic gadget or the new shoes that you want but don’t need.

— Look for ways to trim your fixed costs. You might save money by raising the deductibles on your insurance policies or scaling back the cable TV package. But the big savings would likely come from living in a more modest home, driving fewer or less-expensive vehicles, and getting your debts paid off. One rule-of-thumb: Try to limit your fixed costs to 50% or less of your pretax income.

— Cut out discretionary spending where the dollars aren’t buying you a whole lot of happiness. To that end, think back over the past year and ask yourself, “What spending brought me a lot of pleasure—and which purchases were quickly forgotten?” You might find that, say, the regular dinners out with family and friends were the highlight of the year, but you give scant thought to your closet full of fancy clothes.

We all need help in accomplishing these things! recommends you get together with a close friend or family member to see what they are doing to cuts costs and live within their means.

Jonathan Clements
Wall Street Journal

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